Upgrades, Trade-Ins and BuyBacks
Drew Fudenberg and
Jean Tirole
Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research
Abstract:
This paper studies the monopoly pricing of overlapping generations of a durable good. We focus on two sorts of goods: those with an active second-hand market and anonymous consumers, such as textbooks, and gods such as software, where there is no second-hand market and consumers are "semi-anonymous," meaning that they can prove that they purchased the old version to qualify for a discount on the new one. In the former case, we find that the sales of the new goods are independent of the existing stock of the old one if the monopolist chooses either to produce or repurchase the old good after the new one becomes available, but that this separation does not hold when the monopolist chooses to be inactive on teh old-good market. Moreover, we identify parameter regions where each of these three possibilities will occur.
In the "semi-anonymous" case, we find that if the new good is a sufficiently large improvement the semi-anonymity constraint binds, in that the monopolist would prefer to charge a higher price for upgrades than for sales to new consumers. If the new good is a smaller improvement, then upgrade discounts are optimal, and the outcome is the same as if the monopolist knew exactly which consumers had purchased in the first period. If in addition both goods are essentially costless, then all consumers who purchase the old good upgrade when the new one becomes available. If the old good is costless but the new good is not, and the discount factor is low, there can be "leapfrogging" in that some low-valuation consumers will purchase the new good even though some high-valuation ones purchased the old good at the start and do not upgrade.
Date: 1997
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
ftp://ftp.repec.org/RePEc/fth/harver/19971803.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 File not found
Related works:
Journal Article: Upgrades, Tradeins, and Buybacks (1998) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:fth:harver:1803
Access Statistics for this paper
More papers in Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().